Decision

Fresh Start Housing Ltd (removed charity)

Published 19 July 2017

This decision was withdrawn on 23 January 2020

This case report has been archived in line with our policy because it is over 2 years old.

Applies to England and Wales

• Publication for Northern Ireland
• Publication for Scotland

About the charity

The organisation, Fresh Start Housing Ltd (‘FSH’) was established to provide advice and assistance with finding accommodation for people in poverty including homeless persons and ex-offenders. It was founded as a company in 2010 and registered with the Charity Commission (‘the Commission’) in February 2011. We removed the organisation from the register of charities on 1 July 2016 as we decided FSH was not and had never been a charity.

Why the Charity Commission got involved

The Charity Commission has a statutory objective to promote public trust and confidence in charities. We therefore pro-actively monitor media and social media coverage of charities to ensure issues which could damage public trust and confidence are assessed in line with our regulatory framework.

In November 2015 our monitoring identified an online news article concerning FSH which set out several claims concerning the charity:

• that it was allegedly acting as a conduit for a private business to make money from housing benefit
• that allegedly a letting agency connected to the charity had been paid more than £5.5 million in housing benefit after its owner set up a charity to help the homeless
• that the letting agency, Investing Solutions (‘ISL’) received its referrals from the charity FSH to find properties for single homeless men on housing benefit whom it would then place with several unrelated people in one house and charging housing benefit for each person, rather than the property - therefore, the total benefit payout is higher than the rent fee passed on to the property’s landlord
• the article stated Investing Solutions and Fresh Start were based in the same building, a storage unit in south London

Before we registered FSH as a charity in 2011 we questioned the trustees about the independence of FSH from ISL, and the extent of personal benefit to ISL. The trustees stated that FSH would not refer prospective tenants to ISL exclusively but would refer to a range of housing agencies and providers. The trustees stated that FSH would benefit by charging a fee to landlords and agents when it referred prospective tenants for housing. FSH appointed trustees (who we understood were independent of ISL) to avoid and manage any conflicts of interest if and when FSH decided to refer tenants to ISL.

The media article following assessment against our records therefore raised serious concerns that FSH could be a conduit for personal benefit rather than operating for exclusively charitable purposes for the public benefit (the requirements of a charity).

The action we took

We opened a case to assess whether the regulatory concerns the article and our initial assessment identified warranted further examination.

We examined the records we had from when FSH applied for registration in 2011.

We visited the premises and questioned 2 of the trustees about how FSH operated. We also inspected the FSH’s books and records including financial information.

What we found

We found that most of the trustees appointed since FSH was registered as a charity in 2011 had some form of business or personal relationship with the founder of FSH who owned ISL, leading to us having concerns about the trustees having a conflict of interest and/or loyalties to the founder.

There was a lack of records held by FSH including a failure to keep accurate and detailed minutes of meetings and key decisions. Decisions were made informally and on an ad-hoc basis. As a result of the interviews with the trustees and the records we reviewed, we did not find any evidence of independent decision making.

We found that most, if not all persons, who sought the charity’s help (its beneficiaries) were referred to ISL to be housed, and ISL received a financial benefit from rents received. FSH received no payment for making the referral to ISL (contrary to what we had been informed would be the case when FSH applied to register as a charity) and the trustees did not provide evidence that any other agents or landlords were used by FSH to house persons seeking assistance.

We found that there was an inherent conflict of interest within FSH. From the time FSH was established it had decided to use the services of ISL a company linked to the founder of FSH and ISL had benefited considerably from this arrangement. The trustees failed to demonstrate to us that they had taken decisions that were in furtherance of exclusively charitable purposes and independent of ISL. - There was no clear arm’s length relationship and separation between FSH and ISL.

Impact of our involvement

We removed FSH from the register of charities on 1 July 2016 as we decided FSH was not and had never been a charity.

Charities must be established for exclusively charitable purposes for the public benefit and the purposes must not give rise to more than incidental personal benefit - personal benefit is ‘incidental’ where (having regard both to its nature and to its amount) it is a necessary result or by-product of carrying out the purposes . In this case we decided that FSH did not meet the legal requirements to be a charity as it was not established for exclusively charitable purposes.

The Commission must remove from the register of charities any organisation which it no longer considers is a charity.

The removal of organisations from the register is in support of the Commission’s statutory objectives, in particular the objective to increase public trust and confidence in charities, and in furtherance of its general functions of:

• determining whether institutions are or are not charities
• obtaining, evaluating and disseminating information which expressly includes the maintenance of an accurate and up to date register of charities

We informed HM Revenue and Customs of our decision so that they could review and decide whether to recover any financial benefits FSH may have received.

Wider lessons for the sector

We are robust in our assessment of charitable status and we will investigate any organisations where we have concerns that the purposes give rise to more than incidental personal benefit.

Where information is given to the Commission about how a charity will operate, the Commission may follow up and check how the charity is operating.

Trustees must act only in the best interests of the charity; and actively avoid and manage any conflicts of interest. They should step back from or avoid any situation where a conflict exists or is likely to arise, even if this means, for example, that additional un-conflicted trustees are appointed or that the affected trustees resign.

All trustees must act only in the interests of their charity, and not for their own private interest or gain. There may be situations where a trustee’s own interest and the interests of the charity arise simultaneously or appear to clash, such as when a trustee is receiving payment from the charity (either directly or indirectly). The issue is not the integrity of the trustee concerned, but the management of any potential to profit from a person’s position as a trustee.

Trustees should bear in mind that when they are dealing with the business of the charity, their overriding duty is to act in the best interests of the charity. If conflicts of interest and loyalty are not properly managed, they can cause damage to a charity’s reputation. The key aspect of minimising the damaging effect of conflicts of interest is to be open and transparent about such situations when they arise.

Further guidance

The essential trustee: what you need to know, what you need to do (CC3)

Conflicts of interest: a guide for charity trustees (CC29)

Maintenance of an accurate register of charities (RR6)